On October 13, 2017, Pomerantz LLP was appointed Lead Counsel in a class action lawsuit against Chipotle Mexican Grill, Inc. (“Chipotle” or the “Company”) and certain of its officers. The class action, filed in United States District Court, District of Colorado, and docketed under 17-cv-01760, is on behalf of a class consisting of investors who purchased or otherwise acquired Chipotle securities, seeking to recover compensable damages caused by defendants’ violations of the Securities Exchange Act of 1934.
Chipotle Mexican Grill, Inc. owns and operates quick-serve Mexican restaurants. The Company operates restaurants throughout the United States.
In 2015, numerous customers fell ill after eating at Chipotle restaurants, exposing the fact that Chipotle’s quality controls were not in compliance with applicable consumer and workplace safety regulations and were inadequate to safeguard consumer and employee health.
Facing a sharp drop-off in sales, Chipotle responded with widely publicized measures that the Company touted as improvements to its food safety protocols. On February 8, 2016, the Company closed all of its restaurants for several hours for an all-staff meeting regarding food safety. In addition, Chipotle hired a new head of food safety who implemented a number of changes to policies at the Company’s restaurants—for example, requiring all employees to wash their hands every half hour, mandating that two employees verified that certain ingredients had been immersed in hot water for at least five seconds to kill germs, and using Pascalization to pre-treat food ingredients. By touting these measures, along with free food promotions and increased advertising, Chipotle aimed to restore customer confidence in the safety of its food.
The complaint alleges that throughout the Class Period, defendants made materially false and misleading statements regarding the Company’s business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Chipotle’s purported improvements in its restaurants’ food safety policies were inadequate; (ii) accordingly, Chipotle’s quality controls were still not in compliance with applicable consumer and workplace safety regulations; (iii) in turn, Chipotle’s quality controls remained inadequate to safeguard consumer and employee health; and (iv) as a result of the foregoing, Chipotle’s public statements were materially false and misleading at all relevant times.
On July 18, 2017, media outlets reported that Chipotle had closed a restaurant in Sterling, Virginia due to a suspected norovirus outbreak. According to Business Insider, citing information from iwaspoisoned.com, a website on which consumers document suspected incidents of foodborne illness, at least 13 customers fell ill after eating at the Chipotle restaurant in question between July 14 and July 15. The Business Insider article further stated that customers who fell sick after eating at the restaurant reported “vomiting violently,” fevers, “violent stomach cramps,” and dizziness for several days.
On this news, Chipotle’s share price fell $17.02, or 4.34%, to close at $374.98 on July 18, 2017.
On July 20, 2017, The Wall Street Journal published an article entitled “Over 100 Report Being Sickened at Virginia Chipotle,” disclosing that the number of reports of illness associated with the restaurant-chain continues to rise.
On that same day, Reuters published an article entitled “Chipotle Virginia customer tested positive for norovirus – official,” reporting that a county health department official has confirmed norovirus in a customer who ate at the Virginia Chipotle Mexican Grill Inc. restaurant.
Later in the day, CNBC published an article entitled “Rodents reportedly fall from ceiling of Dallas Chipotle,” reporting that rodents were spotted at a Dallas-area Chipotle on July 19, 2017. According to the article, diners captured the incident inside the restaurant on video, which shows “rodents crawling around the floor and one climbing up the wall,” and with customers claiming the rodents were falling from the ceiling.
On these disclosures, Chipotle’s share price fell $16.78, or 4.5%, to close at $356.05 on July 20, 2017.